VII.1. First Reading of Ordinances Deleting and Replacing Sections 701 and 702 of the Hopkins City Code; BishopSeptember 18, 2018 Council Report 2018-105
FIRST READING OF ORDINANCES DELETING AND REPLACING
SECTIONS 701 AND 702 OF THE HOPKINS CITY CODE
Proposed Action.
Staff recommends that the Council approve the following motion: Move to approve ordinances
2018-1035 and 2018-1036 for first reading.
Approval of this motion will begin the process of deleting and replacing sections 701 and 702 of
the Hopkins City Code to increase franchise fee rates and extend the termination dates on utility
franchise fees until December 31st, 2023
Overview:
The City receives approximately $310,000 in franchise fees per year that support the operations
of the general fund and approximately $300,000 to be used in the park dedication fund. The City
of Hopkins has relied on franchise fees since 2004. Most recently, the City adopted two
franchise fee ordinances beginning on 1/1/2014 with 5 year terms. Under those ordinances,
residential customers pay $2.20 monthly for electric service to Xcel Energy and $2.20 monthly
for natural gas to Centerpoint Energy. Commercial and industrial customers pay higher rates
based on type and size of meter. A chart showing the detailed analysis of rates paid by type and
number of customers is attached.
The proposed rates beginning in 2019 increase by $1.30 monthly each for gas and electric for
residential customers, or $2.60 combined per month. The total paid by a residential household
would be $7.00 per month or $84 per year. The proposal continues to reduce the tax levy in the
general fund and provide for par improvements at the same level. The additional revenue to be
generated is estimated at $360,000 annually and is proposed for use in the capital improvement
fund. The capital improvement fund accounts for projects at any of Hopkin’s buildings without a
separate fund. It includes City Hall, Fire Hall, Police Public Works Building and the Activity
Center. It excludes the Pavilion, Arts Center and Depot Coffee House. The plan is designed as a
way to fund the debt service payments for City Hall renovations.
Supporting Information:
• Ordinance 2018-1035
• Ordinance 2018-1036
• Rate Increase Schedule
• Power Point Presentation
________________________________________
Nick Bishop
Finance Director
528024v1 DTA HP145-42
CITY OF HOPKINS
COUNTY OF HENNEPIN
ORDINANCE 2018-1135
ORDINANCE AMENDING SECTION 701 OF THE HOPKINS CITY
CODE PERTAINING TO ELECTRIC UTILITY FRANCHISE FEES
THE COUNCIL OF THE CITY OF HOPKINS HEREBY ORDAINS AS FOLLOWS:
Section 1. That Section 701 of the Hopkins City Code be deleted in its entirety and replaced with
the following:
Section 701 - Electric Utility Franchise Fee
701.01. Definitions. For purposes of this Ordinance, the following capitalized terms shall have the
following meanings:
Subd. 1. City. The City of Hopkins, County of Hennepin, State of Minnesota.
Subd. 2. Company. Xcel Energy, a Minnesota Corporation (formerly Northern States Power), its
successors and assigns.
701.03. Purpose. The Hopkins City Council has determined that franchise fees should be imposed on gas
and electric utilities in return for their use of City-owned rights-of-way. The purpose of this ordinance is to
establish such franchise fees to be paid to the City by the Company.
701.05. City Authority. Minnesota Statutes 216B.36 grants cities the authority to impose a franchise fee
on gas and electric utility services. Such fees are in return for basic right to operate within municipally-
owned rights-of-way and other public property as provided in utility franchise agreements/ordinances
between a city and the respective utilities operating within the municipal boundaries. In addition, City of
Hopkins Franchise Ordinance 87-578 authorizes the City to impose, by separate ordinance, a franchise fee
on the Company.
701.07. Franchise Fee Imposed. A franchise fee is hereby imposed on the Company, Xcel Energy, pursuant
to City of Hopkins Franchise Ordinance 87-578 and Minnesota Statutes 216B.36 and subject to the fee
schedule below.
A franchise Fee is to be collected by the Company from each customer in the designated customer
classification for service at each and every customer premise, as indicated by the following schedule:
Fee Schedule
Customer Classification Monthly Fee Per Customer Premise
Residential $3.50
Small C & I— non demand $6.15
Small C & I—demand $24.70
Large C & I $170.50
This fee is an account-based fee on each premise and not a meter-based fee. In the event that a customer of
the company covered by this ordinance has more than one meter at a single premise, but only one account,
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only one fee shall be assessed to that account. If a premise has two or more meters for a single customer
billed at different rates, the Company may have an account for each rate classification, which will result in
more than one franchise fee assessment for electric service to that premise. If the Company combines the
rate classifications into a single account, the franchise fee assessed to the account will be the largest
franchise fee applicable to a single rate classification for energy delivered to that premise. In the event any
customer of the Company covered by this ordinance has more than one premise, each premise (address)
shall be subject to the applicable fee. In the event a question arises as to the proper fee amount for any
premise, the Company's manner of billing for energy used at all similar premises in the city will control.
701.09. Date Franchise Fee Takes Effect. The above utility franchise fees shall go into effect in and be
applicable to all of the Company’s billings commencing with bills for the month of January 2019.
701.11. Limitation. Franchise Ordinance 87-578 limits the total amount of franchise fee which may be
collected to 5% of the Company’s gross revenues within the City limits. So long as this limitation remains
in effect, in no event shall the total of the fees collected pursuant to Section 701.07 be greater than 5% of
the Company’s gross revenues within the City of Hopkins as defined in the Franchise Ordinance.
701.13. Payment of Fee. Franchise fees shall be paid to the City quarterly, based on a calendar year, with
payment due by the 30th day after the end of each quarter.
701.15. Dispute. Any disputes or other issues which arise will be subject to the terms of this Ordinance,
Franchise Ordinance 87-578, Minnesota Statutes 216B.36 as well as any other agreements entered into by
the City and the Company.
701.17. Termination of Ordinance. This ordinance and the franchise fee imposed by it shall remain in effect
until December 31, 2023, at which time they shall terminate and be of no further effect, except that the
Company shall remain obligated after that date to pay the City all franchise fees due with respect to any
period of time prior to December 31, 2023, and collected after that date.
Section 2. The effective date of this ordinance shall be January 1, 2019.
First Reading: September 18, 2018
Second Reading: October 2, 2018
Date of Publication: October 11, 2018
Date Ordinance Takes Effect: January 1, 2019
By: ____________________________
Molly Cummings, Mayor
ATTEST:
___________________________
Amy Domeier, City Clerk
528029v1 DTA HP145-42
CITY OF HOPKINS
COUNTY OF HENNEPIN
ORDINANCE 2018-1136
ORDINANCE AMENDING SECTION 702 OF THE HOPKINS CITY
CODE PERTAINING TO NATURAL GAS UTILITY FRANCHISE FEES
THE COUNCIL OF THE CITY OF HOPKINS HEREBY ORDAINS AS FOLLOWS:
Section 1. That Section 702 of the Hopkins City Code be deleted in its entirety and replaced with
the following:
Section 702 - Gas Utility Franchise Fee
702.01. Definitions. For purposes of this Ordinance, the following capitalized terms shall have the
following meanings:
Subd. 1. City. The City of Hopkins, County of Hennepin, State of Minnesota.
Subd. 2. Company. CenterPoint Energy Minnesota Gas, a division of CenterPoint Energy
Resources Corporation, a Delaware corporation, its successors and assigns.
702.03. Purpose. The Hopkins City Council has determined that franchise fees should be imposed on gas
and electric utilities in return for their use of City-owned rights-of-way. The purpose of this ordinance is to
establish such franchise fees to be paid to the City by the Company.
702.05. City Authority. Minnesota Statutes 216B.36 grants cities the authority to impose a franchise fee
on gas and electric utility services. Such fees are in return for basic right to operate within municipally-
owned rights-of-way and other public property as provided in utility franchise agreements/ordinances
between a city and the respective utilities operating within the municipal boundaries. In addition, City of
Hopkins Franchise Ordinance 2002-879 authorizes the City to impose, by separate ordinance, a franchise
fee on the Company.
702.07. Franchise Fee Imposed. A franchise fee is hereby imposed on the Company, CenterPoint Energy
Minnesota Gas, pursuant to City of Hopkins Franchise Ordinance 2002-879 and Minnesota Statutes
216B.36 and subject to the fee schedule below.
A franchise Fee is to be collected by the Company from each customer in the designated customer
classification for service at each and every customer premise, as indicated by the following schedule:
Fee Schedule
Customer Classification Monthly Fee Per Customer Premise
Residential $3.50
Commercial A $3.50
Commercial/Industrial B $8.75
Commercial/Industrial C $24.70
Small Dual Fuel A $48.55
Small Dual Fuel B $170.50
Large Volume Dual Fuel $170.50
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This fee is an account-based fee on each premise and not a meter-based fee. In the event that a customer of
the company covered by this ordinance has more than one meter at a single premise, but only one account,
only one fee shall be assessed to that account. If a premise has two or more meters for a single customer
billed at different rates, the Company may have an account for each rate classification, which will result in
more than one franchise fee assessment for gas service to that premise. If the Company combines the rate
classifications into a single account, the franchise fee assessed to the account will be the largest franchise
fee applicable to a single rate classification for energy delivered to that premise.
In the event any customer of the Company covered by this ordinance has more than one premise, each
premise (address) shall be subject to the applicable fee. In the event a question arises as to the proper fee
amount for any premise, the Company’s manner of billing for energy used at all similar premises in the city
will control.
702.09. Date Franchise Fee Takes Effect. The above utility franchise fees shall go into effect in and be
applicable to all of the Company’s billings commencing with bills for the month of January 2019.
702.11. Payment of Fee. Franchise fees shall be paid to the City quarterly, based on a calendar year, with
payment due by the 30th day after the end of each quarter.
702.13. Dispute. Any disputes or other issues which arise will be subject to the terms of this Ordinance,
Franchise Ordinance 2002-879, Minnesota Statutes 216B.36 as well as any other agreements entered into
by the City and the Company.
702.15. Termination of Ordinance. This ordinance and the franchise fee imposed by it shall remain in effect
until December 31, 2023, at which time they shall terminate and be of no further effect, except that the
Company shall remain obligated after that date to pay the City all franchise fees due with respect to any
period of time prior to December 31, 2023, and collected after that date.
Section 2. The effective date of this ordinance shall be January 1, 2019.
First Reading: September 18, 2018
Second Reading: October 2, 2018
Date of Publication: October 11, 2018
Date Ordinance Takes Effect: January 1, 2019
By: ____________________________
Molly Cummings, Mayor
ATTEST:
___________________________
Amy Domeier, City Clerk
City of Hopkins
2019 Franchise Fee Renewal Proposal
September 18, 2018
\\lisa\share\FINANCE\FMP\2018 FMP\Franchise Fees\Franchise Fee Increase - 2019 Proposal.xlsx
2019 2019 No of Increase
2004 2012 2014 Proposed Proposed Customers Amount to Amount to Capital Total %Annual Annual
Xcel Energy Rate Rate Rate Increase Rate Dec 2017 Gen. Fund Parks Fund Imprvmt.Collections Incr Increase Amount
Residential 1.00 1.70 2.20 1.30 3.50 8,467 101,599 121,919 132,079 355,598.18 59.09%15.60 42.00
Small C & I Non Demand 2.00 3.35 3.85 2.30 6.15 694 16,651 15,402 19,148 51,200.72 59.74%27.60 73.80
Small C & I Demand 9.00 15.00 15.50 9.20 24.70 340 36,689 26,498 37,505 100,692.02 59.35%110.40 296.40
Large C & I 63.00 105.00 105.50 65.00 170.50 70 52,920 35,700 54,600 143,220.00 61.61%780.00 2,046.00
9,570 207,860 199,519 243,332 650,711
2019 2019 No of Increase
2004 2012 2014 Proposed Proposed Customers Amount to Amount to Capital Total %Annual Annual
Centerpoint Energy Rate Rate Rate Increase Rate Dec 2017 Gen. Fund Parks Fund Imprvmt.Collections Incr Increase Amount
Residential/Commercial A 1.00 1.70 2.20 1.30 3.50 5,076 60,912 73,094 79,186 213,192.00 59.09%15.60 42.00
Commercial B 3.00 5.00 5.50 3.25 8.75 199 7,164 5,970 7,761 20,895.00 59.09%39.00 105.00
Commercial/Industrial C 9.00 15.00 15.50 9.20 24.70 201 21,708 15,678 22,190 59,576.40 59.35%110.40 296.40
Small Dual Fuel A 18.00 30.00 30.50 18.05 48.55 15 3,240 2,250 3,249 8,739.00 59.18%216.60 582.60
Small Dual Fuel B 63.00 105.00 105.50 65.00 170.50 7 5,292 3,570 5,460 14,322.00 61.61%780.00 2,046.00
Large Volume Dual Fuel 63.00 105.00 105.50 65.00 170.50 0 0 0 0 - 61.61%780.00 2,046.00
5,498 98,316 100,562 117,846 316,724
Total Total
Residential 2.60 7.00 Total 306,176 300,082 361,178 967,435 Residential 31.20 84.00
Notes:
2004 - Franchise fees were implemented to help offset the loss of $1.8 million in local government aid.
2012 - Franchise fees were increased to fund street improvements.
2014 - Franchise fees were increased to fund park improvements.
2015 - FMP Adopted, 2012 & 2014 increase both used to fund park improvements.
First Reading of Ordinances to
Amend Gas and Electric
Franchise Fees
September 18, 2018
What are franchise fees?
Fees imposed on utility companies for use of
public right-of-ways
Established through ordinance
Fees are collected from users and remitted
back to the City
Typically identified as “City Fee” on utility bill
Are they a tax?
Technically not a tax, but are similar
Key differences from Property Taxes
Paid by schools, governments, churches & non-
profits and users within TIF districts
Not tied to property value
What can they be used for?
Any public purpose
Typical uses are:
Street maintenance and construction
Trails for pedestrians and cyclists
Street Lights
General Fund/Reduce Tax Levy
Franchise Fees in Hopkins
Franchise Fees since 2004
Most recently adopted two ordinances for a
period from 1/1/2014 through 12/31/2018
$610,000 collected annually
$310,000 to support general fund
$300,000 to support parks
$2.20 each for gas and electric (residential)
Total of $4.40 per month and $52.80 per year
2019 –2023 Proposed Increase
2019 2019
Xcel Energy Proposed Proposed %
(Monthly)Increase Rate Incr
Residential 1.30 3.50 59.09%
Small C & I Non Demand 2.30 6.15 59.74%
Small C & I Demand 9.20 24.70 59.35%
Large C & I 65.00 170.50 61.61%
2019 –2023 Proposed Increase
2019 2019
Centerpoint Energy Proposed Proposed %
(Monthly)Increase Rate Incr
Residential/Commercial A 1.30 3.50 59.09%
Commercial B 3.25 8.75 59.09%
Commercial/Industrial C 9.20 24.70 59.35%
Small Dual Fuel A 18.05 48.55 59.18%
Small Dual Fuel B 65.00 170.50 61.61%
Large Volume Dual Fuel 65.00 170.50 61.61%
2019 –2023 Proposed Increase
For residential users:
Increase of $2.60/month or $31.20/year
Total of $7.00/month or $84.00/year
No change to General Fund or Park
Improvements
Increase projected to generate $360,000
annually
2019 –2023 Proposed Increase
Capital Improvement Fund
City Hall, Fire Station, Police Station, Public Works
Building and Activity Center
Current Capital Improvement Plan includes
$1.1 million in projects at these locations
planned to be funded with tax levy
Planned use is City Hall Renovations
2019 –2023 Proposed Increase
Different users pay different amount when
levying taxes or collecting franchise fees
City Hall Renovations
Tax Levy for $236,500 Home = $39.30
OR
Franchise Fees = $31.20
Future Action
October 2nd –Second Reading
January 1st, 2019 –Updated ordinances go
into effect